Banks are examining their earnings through their Revenue Quality Assurance Departments, it was learnt at the weekend.
The departments are helping them to determine if such revenue was genuinely earned or not to protect their brand identity, Chartered Institute of Bankers of Nigeria (CIBN) President Uche Olowu said.
Banks’ earnings have been a subject of controversy, with customers complaining of illegal charges on their accounts. They also accuse the lenders of not adhering to the Guide to Bank Charges template instituted by the Central Bank of Nigeria (CBN).
Despite a tough operating environment and the troubled economy, banks posted a strong performance in 2017, with the 10 top lenders recording Profit After Tax (PAT) of N632.24 billion. Eleven mid-tier lenders and small banks earned over N200 billion in PAT within the same period. As the banks enjoyed the windfall, CBN data showed that over N55 billion illegal charges were refunded to customers.
Olowu, in an interview in Lagos, said complaints over illegal and excessive charges prompted the lenders to set up the Revenue Quality Assurance Departments to ensure that all income is truly earned.
He said various banks put on the compliance procedure on their own. “The banks are even reviewing charges before their customers come complaining. Revenue Quality Assurance Departments assure the quality of earnings that come into the banks. It is a dent on your own brand if continuously you are having dirt thrown on your system,” Olowu said.
According to Olowu, what has impacted on bank charges is the cost of doing business, which he described as “very high”. “The banks practically provide everything and there are no freebies. I do not agree or subscribe to charges that have not been agreed on upfront,” he said.
Continuing, the CIBN chief said: “Please, when you are opening an account, it is clearly stated on the account opening forms that there are no charges outside what you have agreed with the banks. There are banking tariffs but people are so lazy to look at the CBN website to see the approved tariffs. They are all there. There are ones that are negotiable, there are ones that are sacrosanct fees.”
In his view, no responsible bank will want to go outside what was approved for the charges but admitted that there could be occasional situations where that happens. “That is why I made reference that we have to self-regulate ourselves, ensuring that whatever you are collecting as charges, you really earned it,” Olowu said.
Speaking on Automated Teller Machine (ATM) charges, he said the machines cost banks money to deliver services. “How do we recover those investments? So, you can really see that in ATM charges, everything is stated there. If you do not want, take for example the alert charges, you do not want, fine. Look at the value you derive from those services. I think the banks are doing very well,” he said.
According to Olowu, the CIBN determines the rules, ethics and standards of the banking profession but CBN, Nigeria Deposit Insurance Corporation (NDIC) and bank examiners look at the banks’ books to ascertain the quality of their earnings. Besides, the CBN has also set up the Consumer Protection Department (CPD) to ensure that customers are not short-changed.
“If you are a bank and customers keep writing and complaining about excess charges, how will you feel? Those things affect banks’ brands and speak volume about their governance framework. That is why banks are now self-regulating themselves by putting up department to check illegal charges. We do not want a situation, where you earn today and tomorrow you are asked to refund. We must put a process in place to ensure the revenue is earned. We have continually emphasised that bankers must be truthful in whatever they are doing. The only way to do that is to respect contract,” Olowu said.
In Olowu’s view, huge bank profits are nothing compared to the huge capital they put at risk to make such income, but he insists that such revenue must be truly earned.
“When you convert the profits in dollar terms and compare with what happens in Europe or America, you will know what I am talking about. You have not talked about the capital put at risk in deriving those profits. You do not talk about the various funds that were written off, the accidents that happen. So, whether we are making huge profits, people put their money there. They are investors like you and me. We invested in a bank as shareholders; how much are we getting in return? That is where we will know whether they are making humongous profits.”
“Are they charging within the framework of agreed tariffs? Then you are saying there should be freebies so that they will not make much profits. This is a capitalist economy; we are not in a socialist economy. People have put money to provide services and they should be compensated adequately. For me, it is neither here nor there. I make bold to say that if every other sector performs well the way banking has performed, we will lift this economy out of the doldrums,” Olowu said.
Praising the development in banking, he said the country was exporting banking. “ We are almost everywhere around the West Coast; we are dominating. We have perfected the system, whereby people get money and get alerts. The banking sector is attracting the best brains. It is not just about efficiency, but about deploying capital affectively. This issue of huge profit is misplacement as far as I am concerned,” he said.
On how such complaints are being resolved, he said: “First and foremost, you have to realise that there is a Bankers’ Committee Sub-Committee on Ethics in the CIBN. The committee members, headed by a sitting bank managing director from any bank, meet to look at customers’ complaints and resolve them. We have had cases of banks refunding, and cases of letting the customer know that there is no case against the bank and they resolve it amicably.”
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